Kansas plan uses casinos to boost pension system

Kansas Gov. Sam Brownback, left, talks to state Rep. Steve Huebert, right, a Valley Center Republican, in a Statehouse hallway, Tuesday, March 20, 2012, in Topeka, Kan. Brownback says he's encouraged that a pensions bill passed by the House creates an optional 401(k)-style plan for new public employees, and Huebert supports the measure. (AP Photo/John Hanna)

TOPEKA, Kan. (AP) — Gamblers at state-owned casinos in Kansas would help prop up the pension system for teachers and government workers with each hand of blackjack and spin of the roulette wheel under a bill approved Tuesday by the state House.

The measure, approved 92-33, is aimed at boosting the long-term financial health of the Kansas Public Employees Retirement System. It would dedicate future revenues from three state-owned casinos to helping close a projected $8.3 billion gap between the pension system's anticipated revenues and the benefits promised current and future retirees through 2033.

The House's bill also would require public employees hired after 2013 to choose between two new retirement plans, neither of which are traditional plans that guarantee benefits based on a worker's salary and years of services. One of the options is a 401(k)-style plan, in which benefits would depend upon investment earnings. The second option would guarantee a 5 percent interest rate on retirement savings set aside by the worker and state.

The House's vote sends the measure to the Senate, which is working on its own legislation.

Legislators have worried about the pension system's long-term health for a decade or more and have been working on overhauling KPERS for the past two years. But the proposal to use gambling dollars to help close the shortfall represents a new twist.

"It could make a lot of headway," said House Minority Leader Paul Davis, a Lawrence Democrat, who proposed the idea and persuaded his colleagues to add it to the pensions bill during a debate Monday.

Kansas has licensed developers to build and operate casinos in the Dodge City, Kansas City and Wichita areas. It already dedicates $10.5 million of the state's share of the revenues to boosting engineering programs at state universities, and under Davis' proposal, starting in July 2014, three-quarters of what remains of the state's share would go to KPERS.

There are no solid estimates of how much that would be, but Davis predicts it could be several billion dollars over the next 20 years. For the fiscal year beginning July 1, the casinos are expected to generate $80 million in revenues for the state, but that figure is expected to climb in the future.

"It's found money, and we're addressing the debt," said Rep. John Grange, an El Dorado Republican who helped draft the rest of the bill.

Much of the debate about the state pension system this year has focused on whether Kansas should move toward a 401(k)-style plan for new public employees, which a study commission recommended late last year.

Public employee groups oppose the idea, arguing that it's likely to reduce employees' benefits without helping to close the existing funding gap. But supporters of the idea, including Republican Gov. Sam Brownback, say the state can't sustain a pension system in which retirement benefits aren't tied to investment earnings.

Under the House's bill, a new employee would have the choice of a 401(k)-style plan or a plan patterned after one in Nebraska that guarantees 5 percent annual interest on the savings. With the second plan, the worker would get a lump sum at retirement that could be converted to an annuity.

Rep. Ed Trimmer, a Winfield Democrat who voted against the bill, said he thinks starting new plans is unnecessary.

But Brownback told The Associated Press he's pleased House members included an option for a 401(k)-style plan in their bill.